Applied Corporate Strategy Assignment Sample

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Introduction

Incorporation of corporate strategy is vital for all the business organization to enhance the complete financial position and also the brand image. Based on market research, the strategic deployment will provide the organisation with greater competitive advantages in the upcoming future (Zhang, Leng and Zhou, 2020). This particular assignment mainly signifies the current strategic position of GlaxoSmithKline plc. In this regard, the identification of internal and external environmental factor will help the management of this organization to make effective strategies that lead to enhancing the overall performance of the business. Evaluate the strategy and recognize all the independent variable will improve the decision-making process of this organization. 

Organizational Overview

GlaxoSmithKline is one of the popular Pharmaceutical companies all over the world. This organization also expands its business in all over the world, so the overall brand image of this business entity is very high in the marketplace. To gain more strategic advantages, GlaxoSmithKline also used joint venture mode of entries in a different emerging market. In the case of the financial year 2019, the overall revenue of the organization is 33.754 billion, and the net income of the organization is 6.96 billion. More than ninety-eight thousand employees are currently working in this organization. That means the current financial position and brand image are the main strength of this organization so that the company can quickly expand its business in a potential market to grow further shortly.

External Analysis of GSK

External Analysis refers to the identification of different external environmental factors that are essential to recognize the upcoming opportunities and threats of the company.

PESTLE Analysis

There are different external environmental factors that cam hamper the overall organisational operation completely. For that reason identify all the factor using PESTLE framework will help management to recognise all the threats and opportunities effectively.

Political

The health care sector has seen greater political interest over the past due to the higher appreciation of healthcare's significance as an aspect of social security (Zalengera et al., 2014). Change of policy, country-affected restructuring of Healthcare to all UK operating pharmaceuticals in a large amount, GSK has little difference. The governments also support the health care as well as pharmaceuticals organisations in order to improve social security. In this regard, security measures about drugs also high and it can restrict the overall operation of the company.

Economic

There will always be risks to any multinational enterprise. GSK is a multinational company, will face financial challenges from the particular economic pressures of all nations (Mansouri et al., 2020). The factors impacting GSK include influence of interest rate changes, currency exchange effects and rate of inflation impacts. GSK also may be driven by the nation's GDP as well as purchase power of the customer.

Social

This involves social behaviour, types of administration, culture, tradition, etc. As GSK has long been such a multinational company have no risks from such factors. With any of these conditions GSK has long accepted, making it a wide opportunity in upcoming future.

Technological

In case of pharmaceutical industry, technology is one of the vital aspects in order to improve the quality of products (Zalengera et al., 2014). Incorporation of information Technology in this sector will enhance the overall operational excellence that leads to increase the production rate to meets the market demand easily. Use of IT in this sector will provide GSK huge competitive advantages in near future.

Legal

The pharmaceutical company is a highly controlled industry which enforces different rules and regulations. Therefore, the business is progressively dominated by enormous rules, legislation and enforcement (Mansouri et al., 2020). This severely limits its operation, and in recent times, the state has started to impose this regulation to improve security. In order to avoid the barriers, the GSK needs to spend more on research development work.

Environmental

Hazards, global climate change, environmental impact, by environmentalist community that can affect GSK at any moment, respond against the supply chain as well as production processes. This organisation needs to create awareness program among public and social communities regarding environmental problems in order to conserve the Mother Nature (Zalengera et al., 2014). ?for that reason, it is one of the major risk for GSK.

Opportunities

The advancement of technology also changes the medical treatment processes, and most of the people are now dependent on different medicines. For that reason, GlaxoSmithKline has the opportunity to expand its product and services in all over the world (Zhang, Leng and Zhou, 2020). The business was formed through a combination of different smaller enterprises. As a consequence, it has established leading laboratories and at the same time, acquired vast sums of resources, investments and income. GlaxoSmithKline Plc. has an opportunity to grab the attention of both new and existing customers to increase the overall sales volume as well as growing its share in the potential market (Vijayalakshmi and Rajalakshmi, 2020). Market growth would dilute the benefit of the rival and allow GlaxoSmithKline Plc. To improve its profitability as opposed to some other rivals.

Modern technology offers GlaxoSmithKline Plc. A chance to practice competitive pricing structure in the growing market. It will allow the company to provide excellent service to its regular as well as existing customers to increase the number of loyal customers.

Threats

Different macro-environmental factors can hamper the overall organizational operation ultimately. Increase the total price of raw materials is one of the major threats for this organization (Vijayalakshmi and Rajalakshmi, 2020). Owing to the insufficient knowledge of customers, the risk of ineffective products is substantial. In this regard, Environmental laws are becoming tighter, more specific and much more rigorous. The risk of an economic slowdown in markets in European countries presents serious threats. The organization has also forced to deal with the challenge of new traditional forms of herbal products that are much more successful and have fewer side effects (Duan, Cao and Edwards, 2020). Lack of skilled labour in some market poses a high risk to manage the regular workforce, and it can hamper the overall profitability of the organization. High market competition can be the upcoming significant threats for this corporation. In the last few years, steady competitiveness has expanded the number of competitors, placing pressure not just on competitiveness as well as on sales volume.

Porters Five Forces

Porter five forces are one of the vital tools that help the managers to recognize the five major forces that can influence the overall business operation.

Threats of New Entrants

There is a considerable cost of getting into the pharmacy and healthcare business for that reason; the attention of GlaxoSmithKline is also lower in these forces. Developing new technologies which require research and innovation is a quick and expensive process, and a startup organization needs to identify the overall demand of the market. Still, it is not possible (Tatoglu et al., 2020). For that reason, the chances of new entrants are very low. At the same time, a new organization also needs to meet all the eligible criteria's and different government regulations such as Food and drug impose rules, federal laws etc. to get the license from the government. For that reason, high entrants cost for new business will provide this company with more top advantages and upcoming opportunities.

Threat of substitutes

Complementary Alternative Medicines (CAM) is the primary substitute product of GSK. Such forms of modern medicines pose a significant threat to this business, as they were found to be much cheaper and safer compared to standard medicine (Tatoglu et al., 2020). The customers are now also focused on different traditional medication because these products are free from side effects. Due to high research development, the risk of substitute products is very high, and it can reduce the overall sales volume of the organization.

Bargaining power of buyers

Buyers may not represent a major threat to GSK because the country spends much of its R&D on developing new patent items. As a consequence, GlaxoSmithKline faces a low, major threat from consumers (Junior, Kingoriah and Senaji, 2020). The demands of pharmaceutical products are high, and the customer doesn't have the other option to buy. At the same time, words of mouth promotion quality products also reduce the bargaining power of the customer. For that reason, buyers do not pose any threats to the company. 

Bargaining power of suppliers

The main suppliers include manufacturing, transportation, and sale manufactured goods and service providers, research staff, health officers, and inspectors. Through restricting or reduce the quality of materials, they will effectively place major threats to GlaxoSmithKline. This organization also has a spotless record of well-treating its vendors by fulfilling their needs (Tatoglu et al., 2020). The firm also gives the staff outstanding compensation. The organization has a spotless record in fulfilling the contracts with its suppliers. This organization also has an alternative option for resources and raw materials, and it generally reduces the overall bargaining power of the suppliers.

Competitive rivalry

The number of the competition is very high in the potential market, and most of the business is incorporating various strategies to improve the organizational sales volume as well as financial profitability (Junior, Kingoriah and Senaji, 2020). The management of GSK is also using effective strategies to get more competitive advantages in the operating market. Pharmaceutical companies are growing rapidly, thereby producing higher sales and driving downs the prices for long term benefits. Because of this, GlaxoSmithKline is using strategy and forethought to put itself in the business environment for sustainable and long term success that leads to fulfilling organizational objectives effectively.

Figure:

Source: (Lewis, 2017)

Internal Analysis of GSK

Organisational Strengths and Weaknesses

Strengths

Weaknesses

The accessibility of resources, as well as manpower, helps the organization to hire a powerful marketing and sales department. GlaxoSmithKline's powerful marketing and sales network makes it the marketing preference of its customers and aids its overall business performance.

The existing, sustainable cash flows in healthcare would accept higher profitability requirements than todays GSK Sector and provide the potential for differentiation throughout the new business to reduce leverage (Gsk.com, 2018).

The expected company division allows the two resultant companies to develop suitable sources of resources for their long term investment demands including capital allocation goals.

The new joint venture would be well placed for greater revenue, liquidity as well as income growth generated by dominant power product segments, technological advancement including significant cost efficiencies (Rogers et al., 2017).

With the joint venture, some of the most strongly compatible drugs of tried and tested health companies will be combined namely GSKs Sensodyne and Pfizers Advil and Caltrate.

A considerable cost improvement is anticipated for the merger agreement, which is projected to deliver an incremental reduction of the total annual expense by 2022 of 0.5 billion with an estimated total cash cost of 0.9 billion and non-cash expenses of almost 0.3 billion in 2023.

Customer safety issues create concern over the credibility of the organization. Furthermore, the strategies for research and development can also fail to meet the standards needed if there are added complexities owing to the merging of companies.

Due to its high volume production, the firm has already had to hold back many of the goods on several occasions because of inconsistencies with price, quantities or even deadlines (Rogers et al., 2017). The activities of the organization have been hit hard by diluting its reputation as well as its professional reputation.

Although the merger with Pfizer has happened, the Brexit challenge would seriously impact the activity of GSK as the bulk of its revenue is focused through UK/EU trade.

The spike in customs charges, as well as the depreciation of the currency, have contributed to GSK drawing up contingency plans to postpone its activity, to remain sustainable, although the investment spikes have turned out to be a major weakness.

GSK has generated a bad reputation for competence, which may be a potentially negative aspect, after issues surrounding the corruption case in China, market manipulation in Britain and fiscal problems in the US (Luu and Price, 2018).

Among the major drawbacks is that many licenses of GSK are out of date, and for this reason, other firms could take patients to market pharmaceutical goods cheaply, which would contribute to another limitation or a hefty loss of income (Gsk.com, 2018). It is obvious that a lack of sales would hurt R&D, which is the foundation for success in the future as well as the leadership of this company in the world.

Analysing the Competitive Advantages of GSK via VRIO Analysis

VRIO Analysis seems to be a great statistical method for the assessment and comparative value of GSK's tools. VRIO is an expression for the descriptions of the measurement factors, namely "Value", "Rarity", "Imitability" and "Organisation". In other terms, the VRIO Framework is indeed an internal analytical tool that organisations such as GSK use to categorize assets because they have specific features defined within the organisational framework.

 

Value

Rarity

Imitability

Support of Organisation

Degree of Sustainability

Brand Equity

Yes

Yes

No

Yes

Sustainable

Uninterrupted R&D

Yes

Yes

No

Yes

Sustainable

Copyrights and Patents

Yes

Yes

No

No

Momentary

Drugs of Generic Type

Yes

No

No

Yes

Momentary

Successful marketing network and supply chain

Yes

No

Yes

Yes

Sustainable

A segment of consumption and vaccination in developing markets

Yes

Yes

Yes

Yes

Highly Sustainable

From the above given VRIO Analysis of GSK, it can be stated that the factors such as "Brand Equity", "Uninterrupted R&D", "Successful marketing network and supply chain" and "Segment of consumption and vaccination in developing markets" are highly sustainable. In the context of ensuring a sustainable advantage in the future, GSK will accept the four paradigms previously described. Many aspects of the market identity such as "imitability" and "uninterrupted R&D" are of a dynamic type. Similarly, "rarity" is unpredictable and has to be played with quite closely in the sense of effective promotion and supply chains.

In comparison, GSKs policy of creating a shared business with Pfizer would tackle certain momentary sustainable considerations such as Patent and Copyrights and Generic Type drugs, primarily because of the assumption that for GSK, Rarity and Imitability variables are less feasible in Generic Type drugs. In comparison, the factors for momentary longevity are Imitability, and Organizational Support in Copyrights & Patents.

Some of the interesting facets of the VRIO study was that the "Consumption and Vaccination Segment in developing markets" model is very sustainable. To reach the demand of developing nations throughout South-East Asia and Africa, it is crucial to say that the synthesis of the firms will be highly beneficial.

Strategy Evaluation of GSK

To successfully initiate a joint operative venture with Pfizer Inc, GlaxoSmithKline plc can consider potential strategic approaches to ensure competitiveness and service efficiency in a long haul (Islami, Mustafa and Latkovikj, 2020). In this regard, considering the evaluation of porters generic model can promising.

Porters Generic Model

For the benefit of competitive advantage, generic strategies could be implemented by GlaxoSmithKline. The approaches applied to the degree to which the reach of a business is limited versus wide, and to the extent to which the company tries to distinguish its services.

Figure: Porters generic strategies

(Source: Hales and Mclarney, 2017)

Cost leadership:With this approach, the company will aim to become the lowest cost service provider in the industry. To achieve that goal, this conventional approach is used to produce on a large scale that helps the company to leverage economies of scale. It is an aspect where the company will act as a cost leader and discount its services to attract customer base and profitability (Islami, Mustafa and Latkovikj, 2020). It has a substantial cost benefit over competitiveness and therefore can boost the market share in this direction even farther. In this regard, the joint venture needs to attain some significant commodities such as high productivity, extensive utilisation of capacity, comprehensive bargaining power and effective use of technology.

Cost Focus:GlaxoSmithKline needs to seek lower-cost advantages by concentring itself in a specific market segment. In this regard, providing conventional healthcare services with appreciatory pricing will be highly promising for the business. With such accommodation, the company will be able to reach a wider market share through its venture.

Differentiation leadership:Through differentiation leadership, the GlaxoSmithKline will be able to enter even bigger markets as well as seeks to create a competitive edge by industry-wide differentiation. GlaxoSmithKline can use this strategy simultaneously with cost leadership in the different market segment (Hales and Mclarney, 2017). With this approach, the company will choose one or more criteria that purchasers use in a sector and then position the service to fulfil certain standards uniquely. The organization will charge premium prices in that regard for the quality of its services. It can also be helpful to represent higher production values and highly attractive extra value-added features. It will, therefore, enable GlaxoSmithKline to offer superior services and products, strengthen the branding and provide promotional support.

Differentiation focus: The organisation will strive to distinguish within only one or a small number of target markets within the differentiation focused approach (Agbali et al., 2018). The specific customer demands of the segment imply there are possibilities to deliver products which are distinctly different from competing companies that may be targeted at a wider group of service users. With differentiation focus, GlaxoSmithKline will accept the terms of differentiation leadership and develop and provide unique and distinctive services with premium prices. That will attract substantial interest from the targeted market segment.

Evaluation of KPI

Strategic Goals

To reach a wider market share

To increase profitability

Audience/Access

Using lower-cost similar services helps to attract specific customer groups.

Lower cost services will earn more customer bases and increase competitiveness. It will elevate profitability.

Providing unique and differentiated services earns specific groups of service users looking for premium service. 

Premium service costs will generate more profitability and service selling credibility.

KPI Question

To what extent the company will reach a wider market?

How will the company increase profitability?

By practising both cost leadership and differentiation leadership the company will attract both types customers that are looking for value-added premium services and competitively reasonable cost yet satisfactory services. It will enable the company to target both segments and improve market share.

Through the use of cost, focus approaches the company will reduce the price rate yet increase the customer base which will increase profitability. While through differentiation approach the company will earn more from premium services and increase profitability.

Value chain analysis

Porter's model of the value chain is incredibly popular in the corporate world. However, by allocating equal importance to all operations, GlaxoSmithKline Plc. must not treat the model as a static, isolated system to introduce joint venture with Pfizer Inc. The successful study of the value chain analysis allows GlaxoSmithKline Plc. to understand that it does not involve the same level of scrutiny for all operations or roles in a joint venture. The first step in implementing the Porter Value Chain structure (Koc and Bozdag, 2017) is to determine the significance of the activities as per their position in the delivery process of the product/service.

Figure: Porters value chain model

Source: (Koc and Bozdag, 2017)

The activities of porter's value chain model can be divided into two portions such as Primary activities and secondary activities. The primary activities include the production and sales of drugs as well as improvising the performance of the joint venture of GSK and Pfizer. The secondary activities include synchronising and assisting the primary value chain activities.

Primary activities

Secondary activities

Inbound logistics: it includes encountering on different processing phases from resources to end product.

Operations: it includes the manufacturing processes after receiving the raw material.

Outbound logistics: it includes the process of delivery through various mediators such as storing, arranging, order processing, shipment and supply to the consumer.

Sales and marketing: the jointventurehave to offer high-quality drug products at an affordable price to compete in the market. It also includes advertising, branding and pricing.

Services: it includes the pre-sale and post-sale servicesoffered by the joint venture. The offered services will support the reputation of the venture.

Firm infrastructure: it includes quality management, legal handlings, accounting, planning and strategic management.

HRM management: it evaluates the various human resource aspects such as recruitment, selection, training, rewarding and personal and professional development.

Technology Development: the GSK and Pfizer have to be advanced in technology to integrate the production, delivery and marketing.

Procurement: This signifies the processes involved in buying supplies that may vary from tools, machinery, resources, components and other products needed to produce the final product. The venture should consider the procurements to optimise the inbound and outbound logistics and also operations.

SAF Analysis of the strategies

It is very important to choose an effective strategy for the business to meet business goals and achievements. The SAF analysis is used to select the proper strategy for an organisation by considering Suitability, Acceptability and Feasibility of the strategies evaluated (Geronimo et al,. 2017).

Suitability:

The strategies that have been evaluated, such as porters generic model of strategies, porters value chain model and the KPI evaluation, are found significantly suitable for the joint venture of GlaxoSmithKline plc.-Pfizer Inc. as all the strategies will help the venture to measure the environmental, expectation and capability suitability of the venture.

Acceptability:

Among the evaluated strategies, only Porter's generic model and porter's value chain model are identified efficiently acceptable for the venture. The strategies meet the aspects of acceptability criteria of SAF, such as measuring the returns, threats and investors reactions.

Feasibility:

The feasibility portion of SAF is the make or break part of a strategy (Sekhon, Cartwright and Francis, 2017). After analysing all the strategies, it has been recognised that the porters value chain model can be the most significant and effective strategy to implement in the business of the GSK-Pfizer joint venture. As the chosen strategy can help the venture in measuring the resources, propensity and capabilities, it will be feasible for the venture. 

Conclusion

In conclusion, the integration between GSK and Pfizer should be seen to have the ability to exploit the expertise and services as the largest pharmaceutical product business. There is still a long way to go before GSK, as a corporation, becomes a significant player throughout the area of consumer healthcare. Moreover, the fields of concern such as are an uncommon field such as the segment of consumption and vaccination in developing markets around the whole world are highly open. In general, the organisation must concentrate on the approaches above to ensure that correct processes are placed into place for execution to management.

 

References

Agbali, M., Trillo, C., Fernando, T., Ibrahim, I.A. and Arayici, Y., 2018, October. Conceptual Smart City KPI Model: A System Dynamics Modelling Approach. In 2018 Second World Conference on Smart Trends in Systems, Security and Sustainability (WorldS4) (pp. 163-171). IEEE.

Duan, Y., Cao, G. and Edwards, J.S., 2020. Understanding the impact of business analytics on innovation. European Journal of Operational Research281(3), pp.673-686.

Geronimo, A., Wright, C., Morris, A., Walsh, S., Snyder, B. and Simmons, Z., 2017. Incorporation of telehealth into a multidisciplinary ALS Clinic: feasibility and acceptability. Amyotrophic Lateral Sclerosis and Frontotemporal Degeneration, 18(7-8), pp.555-561.

Gsk.com, 2018. GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture | GSK. [online] Available at: https://www.gsk.com/en-gb/media/press-releases/glaxosmithkline-plc-and-pfizer-inc-to-form-new-world-leading-consumer-healthcare-joint-venture/. [Accessed on 29th Feb 2020]

Hales, G. and Mclarney, C., 2017. Uber's Competitive Advantage vis--vis Porter's Generic Strategies. IUP Journal of Management Research16(4).

Islami, X., Mustafa, N. and Latkovikj, M.T., 2020. Linking Porters generic strategies to firm performance. Future Business Journal6(1), p.3.

Junior, N.K., Kingoriah, G.K. and Senaji, T.A., 2020. Managers Comprehension of External Environment and the Performance of the SMEs in Kinshasa. Journal of Entrepreneurship & Project Management4(1), pp.28-41.

Koc, T. and Bozdag, E., 2017. Measuring the degree of novelty of innovation based on Porter's value chain approach. European Journal of Operational Research, 257(2), pp.559-567.

Lewis, R., 2017. Porter's Five Forces of competitive advantage.

Luu, V. and Price, M., 2018. GlaxoSmithKline Health Care Fraud Settlement with the US Justice Department, 2012. Student Works.

Mansouri, M.A., Sacr, P.Y., Coc, L., De Bleye, C., Dumont, E., Bouklouze, A., Hubert, P., Marini, R.D. and Ziemons, E., 2020. Quantitation of active pharmaceutical ingredient through the packaging using Raman handheld spectrophotometers: A comparison study. Talanta207, p.120306.

Rogers, P., Burns, C., Cupper, J.K. and Monkman, D., 2017. Healthy choices: GSKs internal and external partnering strategies for growth in Asia. Corporate Real Estate Journal7(1), pp.63-74.

Sekhon, M., Cartwright, M. and Francis, J.J., 2017. Acceptability of healthcare interventions: an overview of reviews and development of a theoretical framework. BMC health services research, 17(1), p.88.

Tatoglu, E., Frynas, J.G., Bayraktar, E., Demirbag, M., Sahadev, S., Doh, J. and Koh, S.L., 2020. Why do emerging market firms engage in voluntary environmental management practices? A strategic choice perspective. British Journal of Management31(1), pp.80-100.

Vijayalakshmi, D. and Rajalakshmi, G.R., 2020. Rural Entrepreneurship: A Review of Internal and External Environmental factors influencing the Performance of Micro, Small and Medium Manufacturing Enterprises. Our Heritage68(30), pp.3568-3582.

Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T., 2014. Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews38, pp.335-347.

Zhang, C., Leng, M. and Zhou, L., 2020. Developing Strategies Of Social Enterprises Explained Using Porter's Five Forces Analysis Model: Taking Mental Challenged Car Wash As An Example. International Journal of Organizational Innovation12(3).

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